A new report by the KC Federal Reserve showed farmland values have trended at- or near-record highs across most of the U.S. last fall and into this year. Values in most states, in particular those in the Corn Belt, Texas and mountain states, have increased between 20% and 25% in 2021, though that trajectory has softened to between 2% and 4% in the first quarter of 2022. Average land loan rates saw increases in the first quarter of the year and if the Fed continues to raise rates, a reduction in farmland value will likely occur.
If investors lose enthusiasm for farmland purchases among higher interest rates and subsequently higher profitability needs, land values will likely fall to meet the decrease in demand. Much of the future of land value pricing will depend on how far the Fed will raise interest rates and how long investors will tolerate the more competitive environment.